In this paper, we develop a model of collusion in which two firms play an infinitelyrepeated Bertrand game when each firm has a privately-informed agent. The colluding firms, fixing prices, allocate market shares based on the agent’s information as to cost types. We emphasize that the presence of privately-informed agents may provide firms with a strategic opportunity to exploit an interaction between internal contracting and market-sharing arrangement: the contracts with agents may be used to induce firms’ truthful communication in their collusion, and collusive market-share allocation may act to reduce the agents’ information rents.
Price-fixing collusion; Private information; Internal contract; Information distortion
Games and Economic Behavior
LEE, Gea Myoung.
Optimal Collusion with Internal Contracting. (2008). Games and Economic Behavior. 68, (2), 646-669. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/1027
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